Cash is King: Advising CRE Clients in Indianapolis with Ryan Cadwell

Ryan, thank you for being here today. Let's start the conversation with you telling us how you and your clients are navigating market uncertainty today.

Thanks for having me, Jonathan. I personally, the way that I've been navigating it right now is moving more into cash. So, and we've had a lot of our clients over the last few years have actually during the peaks of the nice cap rates. We've had a bunch of clients that have moved into cash over those years. So a lot of it I would say is patience, recalibrating. But at the same time, I think the main, I mean, the main point to that answer of whether or not, you know, what we're doing is right for you has more, it has more to do with goals. I mean, is it time for you to exit? Is it time for you to reposition? Is it time for you to be patient? I do expect interest rates to adjust down based on what the Fed is saying, based on what jobs are doing. But that probably needs to be a longer-term plan beyond 2026. I do think there's going to be some opportunities there, which is the reason why we're moving into a little bit more of a cash presence right now.

Is the Source of Commercial Real Estate, where we talk to the experts in commercial real estate so we can all make better real estate investing decisions. I'm your host, Jonathan Hayek, and today we are talking with Ryan Cadwell. He's one of the founding partners at Resolute RDM. He's based in Indianapolis. Ryan, thank you for being here today. How are you doing?

Good, Jonathan, pleasure being here.

It's great to have you. Looking forward to the chat. Let's continue the conversation with you telling us more about your background and what your work is today.

Been in the game going on almost 18 years. Started out on the residential side, focusing on management operations. Been in the brokerage world the whole time. And where am I focused right now? Building out and developing more of the commercial real estate opportunities that we, you know, that we're able to come across right now. Navigating some of the private equity money that we have across the table, trying to get, you know, trying to get some placement of that lower cost, lower cost debt, lower cost cash. Yeah, I mean, looking for deals, grinding away and just trying to maintain patience.

In terms of how you spend your time, talk about percentages or how do you spend most of your time? Are you mostly in the brokerage world? Are you looking for deals for yourself? What takes up the majority of your time today?

It's split, it's split probably 60-40. 60% of it is mostly in a consultative advisory role, working with clients, working on their properties. Working on plans, um, business planning, um, with business planning with owners of either businesses and/or real estate and/or figuring out when and how to utilize, uh, real estate within their business plan, whether they're going to be leasing long-term, whether they're going to lease with an option to purchase, those kinds of things. I spend, I spend about 60% of my time there, and then 40% working on specific development projects, whether that's— sometimes it's advisory. Most of the time it's, it's us investing, being in the general partnership role. I've been looking for some LP roles for us to be able to fill. Haven't found any of those yet, but yeah, that's about 40% is, is on the investment side with 60% on the brokerage advisory side.

Do you have developments going right now?

Yeah, we do.

What are you working on?

We've got a, I've got a few offers out on, on some local retail mixed-use stuff where we've got a few different submarkets around Indianapolis. And then we've also got a more dense multifamily out in Missouri.

Tell me about, uh, what you have going on in Indy. What type of— is this ground-up development or redevelopment kind of stuff? What, what kind of a project is it?

Yeah, it's ground-up. Uh, well, it's actually ground-up redevelopment. So I mean, we'd have to scrape the ground with what's there and, and, and pull something, pull something much larger out of the ground. Um, and then recalibrating recalibrating some land. We're looking, I mean, we're looking for some land, and going through some of the zoning things that we gotta do. Make sure, make sure economic development and cities are on board. All those kinds of things, but mixed use is what, is what we got around town right now that we're working on. Smaller mixed use, not the major stuff. We're not one of those bigger players yet.

When you think about your work in brokerage and as you're advising clients, what are some of your clients' biggest challenges that they're coming to you with?

I think it's the same thing that we, that we're all kind of wondering is where exactly are we in the market cycle? Where is money going? Where, where's the cost, you know, where's the cost of debt going to go? Is it going to continue to go down? Is, you know, is there, is there a recession on the horizon? Are we in one? Um, not revenues and all that stuff aren't always completely indicative until after you're already through a cycle or in the middle of a cycle. So having a lot of those conversations around where they're at on the strategy side, where they're at on, you know, uh, Pulling back on spending, you know, ramping up the cash for the storm. How long will the storm be? And that depends on the business. It depends on what economic, what part of the cycle for the year or what part of the cycle in their business they're in.

But a lot of it still has to do, I mean, are they a tariff-affected company?

Are they, are they affected by those, you know, a few layers away where it still has, you know, it's going to have a ripple effect, but that's further down the road. And then how, how are they navigating that? Are they, you know, are we squeezing down square footage? Are we repurposing something? Do we need to squeeze down and then lease out? Those kinds of things, those kinds of conversations.

It sounds like uncertainty is ruling the day and that businesses are just having a really hard time making decisions without knowing what's coming down the line. Does that— does the uncertainty drive clients to stand and do nothing and just wait it out and see what happens? Are they looking to downsize? Are some of your clients looking to make moves and, and purchase and get bigger space? Are, are there any themes or patterns emerging?

Yeah, there, there are, there are clients that are, they're looking to, to move. They're looking to grow. They're, they're in a growth pattern.

If anything, there's a lot of opportunities and the majority of them you need to say no to. Mostly, mostly because you need to grow slowly on purpose in in so many different categories aside from, you know, the AI boom. If you're in that world, that's, you know, that's just going to the moon and further. Everywhere else, there is growth taking place. It just has to be methodical and strategic.

There's just not a lot of kind of the willy-nilly decisions, the overconfidence, that's not there.

Anymore.

Uh, it doesn't mean that they're necessarily scared or concerned. They're just, they're being a little bit more mindful.

Um, they want to make, uh, they're, they're judging the decisions around not having as much runway for there to be a bad decision. So gather more data, take your time. Um, make sure that we're negotiating certain aspects that are higher risk as best we can with the ability to maybe pivot if, you know, if an opportunity changes, whether that's debt, whether it's equity, or it's a combination of both. You know, are we, are we going to do, you know, if we're going to do like a sale-leaseback, for instance, are we going to do a first right of refusal built into that in order to maintain control? Some of those You know, some of those ways in order to, for a business to be able to grow, for them to capitalize at the same time, um, their business so that, so that they, they're nimble and they're able to react to economic changes, but they're also not giving up too much power and control over, over the property that they're occupying, using, and, and, and, and need for business.

Ryan, that answer reminded me of how you started this conversation in your intro when you said that you're putting more emphasis on cash right now, and some of your clients are as well. Can you elaborate on that? Uh, why are you, why are you hoarding cash right now?

Just spending a lot more time listening to everybody around. I, I just, I had an inclination, um, And I think everybody can kind of feel it. I mean, depending on just basic stuff like you talking to your friends and, uh, you just, just listen to the things they say, listen to how they're treating money, listen to— remember how people were treating money in '21 and '22, um, how a little bit how more free everyone was with it versus how they're talking about it now. And when you hear that, that's the general consumer. And that consumer is impacting every business that's around. So taking in some of that data and then going to, you know, going to the economic, going to those economic events and listening to what some of the bigger players are saying, talking to my lenders, what are they seeing? What are they seeing in,, in the, in their borrowers? What are they seeing from their boards? Like, what are they allowed to do? What are they not allowed to do? I, I get a lot of data from, uh, just taking my lenders to lunch. Um, most of the time lenders are expected to pay, so I, I pay for their lunch and then I just, I grill 'em on what are they seeing?

What are they expecting?

Where are they getting tighter?

Where do they see their competition getting tighter?

Like, just to get— to get kind of a barometer from the people on the ground doing the deals, lending money. So those kinds of conversations are going to tell you, when banks get tighter, the people with the cash usually have a lot better opportunities and a lot better power in negotiation.

And and the ability to pivot within their business.

What you, I mean, sometimes the pivot is don't move yet. Sometimes the pivot is, you know, stay where you are for 6 months and then we're gonna, you know, then we will move and, you know, something will open up or this already is gonna open up. So, One of the, I mean, one of the bigger outfits in town, one of the things he said that's really stuck in my head over the last 6 months is if you're developing, the number one thing you cannot do is run out of cash. As soon as you run out of cash, you, I mean, the sharks are already circling and the main person that's getting taken out is the equity, the original equity. It's either getting diluted or you're getting completely removed. In some way. So whatever you're doing, cash is always king. And right now you just need to be in that cash preservation, cash accumulation phase. It just, there's going to be a lot more deals and a lot more opportunities for people that are, that have access to capital.

How do you advise clients who ask you, is this a good deal? Or what makes a good deal in terms of value and basis and cash flow? And I imagine the answer is different with an owner-user versus an investor, but when someone comes to you and says, hey, what is this a good deal? Or what makes a good deal today? How do you respond to that?

What do you want? What usually, and you, and, and, and the typical answer that, I mean, that sounds very vague, but if you slow down enough and you actually ask enough questions, what do you want?

Why do you want it? How much is it gonna cost? What, what type of return do you have to have? What is your opportunity cost? What's your cost of capital? You know?

The answer to what do you want and why do you want it starts to open up the direction that your client should go because in every market money's being made. And in some bull, you know, in bull markets, a lot of people, everybody acts like they're making money. In bear markets, people are making money too. So it really just depends on who you're in front of. What they actually want, what their business model is. And because just because interest rates go up or interest rates go down, yes, that, that has an impact on some of the equation. But if, if you don't know what you want, you don't know what direction you're sailing, it really makes no difference. Because if you don't have a rudder and you don't have any sails to, to go in a specific direction, you're just gonna sit there. I mean, John Rockefeller said buy when blood is running in the streets. Like, there's— just because the economy feels stressed or feels negative, I mean, consumer sentiment is really low right now. Over the last 25-year period, it's down near where it's been the last 3— it's been 3 times in the last 25 years. So a lot of people are feeling that, but that can be an opportunity for people. So it's asking those questions.

What do you want?

What direction is your business going in? You know, and then figuring out from a, from a numbers standpoint, what does it, you know, what makes the most sense? Is keeping capital, are you going to make way more money by your business retaining the capital? And, As opposed to owning the real estate. Some of the smaller, you know, some of the smaller owners and CEOs of businesses that are trying to figure out whether to own and be an investor, that's the pull you've got on two directions. 'Cause a lot of times businesses, their opportunity costs or the amount of money they can make by having that capital in their business far exceeds what they're gonna make on a regular on a regular real estate investment deal.

Ryan, as I was doing my research on you, I noticed that you're pursuing the CCIM designation. Can you talk about your motivation for doing that and what value that brings?

So yeah, that, that's actually been a major eye-opener for me as far as just getting beyond Well, answering a lot of the questions that I had coming up. I, I, I've been spending the last couple years asking loan officers, asking other colleagues and brokers within, uh, within the space questions about why certain deals were being done when, when money was super cheap and just trying to figure out the analytics and, and, and the whys, like what was driving someone to do that deal. To me, It seemed like a terrible deal or an extremely risky time to be buying when cap rates are basically at the total bottom and interest rates are extremely low and you have all this—

to me, you have all this future downside because cap rates only have pretty much one direction to go at that point. In asking a lot of those questions and spending a lot of time just trying to understand why are certain investors buying, why aren't they buying, when is the market right. I was taking in different things. I'm, you know, I'm part of a commercial real estate mastermind and a bunch of those guys in that mastermind are CCIMs and I was learning a ton from them.

And so then I just started looking at the curriculum and actually being a CPM and having already earned that from IRM, I could fast-track the CCIM in order to, in order to, you know, to get through the classes.

And I thought, at first I thought, I'll just get through the classes. I'm sure I'll pick up some stuff, but so far the data that comes out of that, the amount of knowledge that's in those the instructors and then the colleagues and the people that have it. It does two different things. It teaches you and it helps elevate your commercial real estate game. It also, it's more than just putting letters after your name. It also kind of indicates, like if I'm working a deal and I know there's a CCA on the other side, I already kind of, I already know, A, the ethics he's, you know, he, he said he's going to operate by, but also the training he received is similar to mine. Um, how we're going to negotiate deals. I mean, a lot of it, um, and a lot of negotiation doesn't have to be winner-take-all, zero-sum game. A lot of it's just, you know, what does your client need? Or what do you need? Like, like, what are the goals? And can I help you get there and still get what, what we need and what we want? I mean, that's the way Every people use win-win and the only reason why I like, I don't like win-win is it just, sometimes it just feels, uh, it feels counterproductive. Um, it feels too positive. It, yes. I mean, at the end of the day, if everybody gets what they want, I mean, that's, that's the goal.

I mean, whether or not you could have gotten a little bit better of a financial deal, does it really matter if. Buyer's solid, they're able to close quickly. You know, it's not gonna be this completely unprofessional transaction where you, you know, you might pay, you might pay more if you got debt on your debt because, you know, they missed a few of their deadlines, those kinds of things. So from the CCIM side of things, it's, it's It's been extremely educational. Um, and it's answered it. It's brought all these different puzzle pieces I had in my head that I was seeing in the marketplace.

I was trying to figure things out and then I was like, okay, this is how you establish, you know, what your, you know, what your required return on investment should be and what a realistic number is. And then how to talk to an owner about the discount rates you're going to use and, and how to figure out, you know, in a future deal, how much, you know, how much that deal is actually worth in today's dollars. So then how you structure the deal, how much cash is now, how much cash is then.

It just enables you to bring your clients and/or yourself. I mean, if I'm investing in the deal, it allows me to understand where the true numbers are.

So when I'm saying no, I'm not just saying no because my gut told me no. I'm saying no because, um, unless I can get it for this number at, at this time, that, that for, for, for what I have to hit, um, the, the numbers are what's telling the, the story of no, not just, oh, I, you know, based on my 18 years of experience and these other 3 deals, they were okay, and this one was bad, so I'm gonna, I'm gonna kind of lean on that. Instead of it being that, it's more of a, okay, so mathematically, the way this all shakes out, this is what I, these are the returns I could expect, I should expect. And it, it just allows a kind of a foundational understanding. It just goes beyond just getting deals done, just throwing stuff out there like, Well, cap rates are this, and I get a lot of that when I'm talking to brokers. Well, cap rates are this. And I'm like, well, that just means the other guy's willing to pay that cap rate. That doesn't make the cap rate right. And, and/or is the counterpart that's willing to pay a lower cap rate than me, is, do they have a different cost of capital? I mean, if their cost of capital's dirt cheap and they just have to get it in a deal, they're probably gonna win deals I'm not gonna get if my cap rate can't be that low. So it, it's, it's added a whole bunch more of behind the scenes, like how, how does the, you know, how does the clock actually work as opposed to, um, just kind of guessing and, and doing the cap rate math, but not really understanding, well, how did we get to that cap rate? What is a good cap rate for you in this scenario kind of thing?

Ryan, I want to get your expertise on the Indianapolis MSA as a market for investing. A lot of people from the outside think of Indy as a very stable cash flow kind of market, and, um, just want to kind of leave it open-ended to you about how the Indianapolis MSA is performing. Are there submarkets that you really like that you think investors should be interested in?

Yeah, so in Indianapolis is extremely stable, the lower highs and shorter lows. We, you know, we stay pretty close to the midline most of the time. It changes, you know, it changes your investment criteria a little bit. You're not going for the home runs all the time. You're going for the base hits, the doubles, those kinds of things. Um, the, so path of progress, I think there's a lot going on downtown.

Downtown went hot. Um, downtown went really hot and a lot of money got dumped into it, you know, um, '16 through '18. Um, that trend is, you know, that trend's starting up again. There, there, there are a few, there's a few areas that are developing. There's a few of 'em that have kind of stalled a little bit, but There's still some development going on downtown. Path of progress right now is, um, is northeast, northwest, and, and a lot to the south. If you follow the interstates, I mean, we're basically, we're the crossroads of America, so everything's either 70, 74, 65, and 69.

Um, all those interstates have a lot of development going on. And in the next few years, with a lot of the basic jobs that are going to be coming in, you know, from the different major capital investments that are coming in from, you know, Lilly and Amazon and Roche and a lot of these other bigger players, there's going to be a lot of ripples that are going to spread out.

You're going to have some of your, some of your smaller markets right now. Those are going to be able to start growing. You're going to have rent rates that are going to catch up. I mean, some of the hurdles I'm running into right now on some of the deals that we're trying to get out of the ground is just that rent rates haven't quite caught up to what my build costs are. But as long as those are in paths of progress and going to ripple out from where a lot of that major major investment is happening, you're gonna see some of those smaller towns and cities just balloon over the next 10 to 15 years.

Ryan, I've enjoyed this conversation. If listeners wanna connect with you and learn more about Resolute, where would you like to send people?

ResoluteRDM.com or just grab, look me up on LinkedIn and Ryan Cadwell. Uh, I think there's a couple of us, but Indianapolis-based and Resolute RDA.

Great. Ryan, thank you so much for being here today.

Thanks, Jonathan.

Appreciate it.

This content is for entertainment and informational purposes only. It is not financial advice, and it is not an invitation to buy or sell real estate or make any investment decisions.